Eules Hermes predicts growth in GCC and Middle East GDP

Eules Hermes released a report titled, ‘Hot, bright and soft spots: Who could make or break global growth’, was released earlier this month in Paris, and makes a number of predictions in favor of the GCC economies.

According to the report, the Middle East will likely experience 3.6 per cent growth of GDP in 2014 and 4.2 per cent in 2015. Last year, the recorded GDP growth was 2.6 per cent, this shows that the climate is already changing and expected to improve further.

The GCC region, specifically, is anticipating the same growth rate as the entire Middle East, if not higher, determinant on state spending. The rate of expansion in the Gulf region, according to the report, is higher than that of nations such as the UK (growth rate of 2.4 per cent) and the US (growth rate of 2.8 per cent).

The report notes, “The combined assets held in the Sovereign Wealth Funds of the GCC countries is estimated at approximately $2,250billion, with $975bn held by the UAE and $680bn by Saudi Arabia. The financial cushion provided by such reserves (of variable liquidity) allows GCC countries to boost domestic demand through state spending on infrastructure projects (thereby boosting jobs and future growth) and on social spending (health, education and other welfare provision). Trade opportunities with the GCC are, therefore, likely to remain relatively buoyant in the forecast period, even if global conditions are not supportive.”

Also, GCC countries are home to more than 29 per cent and 23 per cent of global oil and gas reserves, respectively: “Output from the hydrocarbon sector was a key driver of growth in the period from 2011 to date, when benchmark oil prices were $100 per barrel, or above. With a combined population of only 49 million, oil export revenues have enabled foreign exchange reserves to remain high and, in particular, accumulation of financial assets held in SWF.”